To understand the mechanisms of malignant transformation at molecular level, we have devised a strategy to isolate novel oncogenes using an efficient expression cloning system. Through analysis of the signaling pathways utilized by the oncogenes which were isolated by this strategy, we are attempting to clarify the molecular mechanisms of malignant transformation. In this fiscal year, the following two new oncogenes were isolated and characterized in detail. (1) A novel oncogene, designated NET1, was isolated from a human neuroepithelioma cell line. The NET1 cDNA encoded a predicted protein species of 54 kDa containing the Dbl-Homology motif, which is implicated as regulators of small GTP-binding proteins. The NET1 oncogene cDNA was activated by 5'-truncation, since a full- length cDNA encoding the NET1 proto-oncogene did not display transforming potential. The NET1 transcripts were ubiquitously expressed in all the tissues examined. Using fluorescence in situ hybridization, we localized the NET1 gene to the short arm of human chromosome 10 at band p15. (2) A constitutively active form of fibroblast growth factor receptor 2 (FGFR2) was identified in osteosarcoma cells. Unlike other tyrosine kinase receptors activated by N-terminal truncation in tumors, this receptor, FGFR2-ROS, contains an altered C-terminus generated from chromosomal rearrangement with a novel gene, designated FRAG1. While the removal of the C-terminus slightly activates FGFR2, the presence of the FRAG1 sequence dramatically stimulates the transforming activity and autophosphorylation of the receptor. FGFR2-ROS is expressed as a unusually large protein and is highly phosphorylated in NIH 3T3 transfectants. FRAG1 is ubiquitously expressed and encodes a predicted protein of 27 kDa lacking significant structural similarity to known proteins. FRAG1 protein showed a perinuclear localization consistent with expression in the Golgi complex. The highly activated state of FGFR2-ROS appears to be attributed to constitutive dimer formation and higher phosphorylation level as well as possibly altered subcellular localization. These results indicate a unique mechanism of receptor activation by a C-terminus alteration through a chromosomal fusion with FRAG1.